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ABM study tracks dramatic decline in magazines' profitability

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Hammered by the decline in traditional ad revenue, b-to-b magazines saw their operating margin plunge, on average, from 11.0% in 1999 to 0.6% in 2003, according to a new profitability report prepared for American Business Media by the Jordan, Edmiston Group.

The media investment bank presented its findings last month at ABM's Top Management Meeting.

During the five-year period covered by the report, the average b-to-b magazine's ad revenue fell from $3.4 million to $2.8 million, and its publisher's profit dropped from $1.4 million to $978,000. (Publisher's profit is total magazine revenue minus total magazine expenses before G&A and indirect overhead.)

"The most concerning [finding] was the evaporation of profitability, therefore cash flow, therefore the value of the core magazine," said Richard Mead, managing director of Jordan, Edmiston.

On a positive note, Mead said that if advertising should return to its 1999 level, magazines would see their profits boosted by an average of $700,000 to $800,000 because of the cost cuts they've made in recent years. Mead stressed that the profitability study didn't cover alternative revenue streams, such as trade shows, conferences, newsletters and the Internet. He said Jordan, Edmiston wants to include that information in its next study for the ABM.

The report was based on a survey of 111 magazines: 98 with less than $5 million in annual revenue; nine with revenue of $5 million to $10 million; and four with revenue of more than $10 million.